Amid periods of financial volatility like we find ourselves in now, many firms are looking to build their cash reserves and reposition their firm for the future. One strategy law firms have benefited from is utilizing a cash reimbursement for previously purchased equipment or soft costs to provide additional short-term liquidity.
In a cash reimbursement, the lessor reimburses the lessee for equipment or soft costs purchased within the past 6-12 months. Here are some of the most commonly reimbursed assets from law firms:
Once the transaction is finalized, the lessee will receive a 100% reimbursement of the cost of the equipment included in the lease and lease payments begin. Lessors can work with the lessee to provide customize repayment terms, including step-up payments and deferred payments.
The financial disclosure requirements for a cash reimbursement are generally the same as a traditional lease transaction. The lessor will require three years of audited financial statements and the most recent interim financial statements. The lessor will also require copies of the vendor invoices for the equipment and proof of payment. Equipment inspections may also be required.
Some law firms are experiencing or are preparing to see a shortage in cash as they wait on accounts payable. Receiving a cash reimbursement for recent technology or other capital investments allows the firm to build their cash reserves and ready their firm to react quickly and invest in their employees or manage partner distributions.
Considering your equipment as an additional source of liquidity is a quick and easy way to replenish your cash for 100% of a completed project’s costs, enabling you to remain nimble and invest in your operations as needed.
Other advantages include:
This year has taken quite a few unexpected turns. It’s forced us all to respond quickly to things we couldn’t have planned and budgeted for last year. Cash reimbursement is just another option you have at your disposable to help you get through it.
